JCI - Earnings call transcript Q1 2021 | Johnson Controls International plc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Antonella Franzen

Good morning and thank you for joining our conference call to discuss Johnson Controls’ First Quarter of Fiscal 2021 Results. The press release and all related tables issued earlier this morning as well as the conference call slide presentations can be found on the Investor Relations portion of our website at johnsoncontrols.com.

Joining me on the call today are Johnson Controls’ Chairman and Chief Executive Officer, George Oliver; and our Chief Financial Officer, Olivier Leonetti.

Before we begin, I would like to remind you that during the course of today’s call, we will be providing forward-looking information. We ask that you review today’s press release and read through the forward-looking cautionary informational statements that we’ve included there.

the use that measures sections you press that will and our of we items. release ask these we read address addition, certain in non-GAAP discussions, our In of use through the In discussing references earnings well and share per as restructuring the other and exclude costs to EBIT, adjusted EBITA integration results our during call, as special items. appendix the release together non-GAAP on measures reconciled the in are and posted free press and our flow schedules the cash with to our These metrics attached presentation to in are website.

prior comparisons to are all ops Additionally, continuing basis. the year on a

Now, let call to George. me turn the over

George Oliver

with good Thanks, brief in Year and on treating strategic today’s you Hopefully morning Antonella, start for is joining far. us a everyone. Thank so you update New the well call. will I will time QX outlook questions. our take on provide more our update results of detailed forward those of results. plenty review to and have a of summary you your and we’ll Olivier

Slide get X. Let’s on started

a the We momentum our initiatives. off performance first strategic on all start accelerating financial solid to and are with of quarter strong in

in execution few enabled to will last cover continued despite communicated to grow ongoing which by related you the at impressive the expectations a end pandemic. segments we minutes, we to was top-line quarter, with X% year-on-year, together the across As all high operational performance of EBIT us volume pressure

markets, vaccine we many the focused of being degrees suppliers. and the employees, and promise still improving a third With lockdowns on made of case, sparking our is that customers our have second is continued of with demand, and which we world modest varying remained to of facing several waves to end the regions the many commitments Although restrictions. there in sequential optimism of show

improving of the Our come businesses things, executing our truly strategy. together to our overall and fundamentals teams extraordinary have achieve

recognition to we quarter, the honored were organizations. from receive several During

ambitious announced this set commitments, reinforcing issued in change. seen priority as sustainability a Additionally, climate of release top we role as you separate ESG in morning, leadership press a an earlier may have our new in

There been of driving page as comprehensive creation incredible that efforts across is floor the build on Lastly, initiatives, technology the attachment been several businesses the and new of the Twin a excellence built, with transforming turn our last engagement the growth in Johnson OpenBlue, we countless with building. core has product entire and over and both exciting of as service higher to Microsoft last digital sales and months, our years. December, well announced Digital The physical on towards an that a throughout spaces, have been conceived, the you with we as teams early tremendous individuals the operated, to few colleagues over global internally, replicas amount supports organization. platform collaboration underscores customers couple growth commitment to we over our at of across partnership X. systems, Controls have gain with reflects processes, partners. the traction want the enabling accelerating driving agreement OpenBlue part our how discussing a by I functions of rates to congratulate company Twin and are of several In continued quarters, we introductions. as buildings people. ecosystem to our of Slide Digital leadership Please scaling last various and next which the

influence climate announced ambitious culture an and planet on I toward Chair world challenge nation’s been am I Environment to opportunity to the the the set and change, into Additionally, to my colleagues a morning. policies to this to our roundtable. Energy business is honored of look the is would Sustainability selected forward for values. I and our addressing center vision commitments the highlight as healthy Committee Slide we working of serve X, having have significant like to the and the the integrated at ESG On today. facing of most with new

OpenBlue our to customers to the our platform, directly creation value we with ESG. Now provide linked is

In we than setting Climate by years is science-based XXXX. Changes enable to our before by of Convention cap on our UN zero required global X.X°C to warming targets, goal by a terms through new which XXXX, commitments, which environmental us emissions net achieve Framework the XX are goal carbon earlier

direct our will R&D to investment we products climate new XX% and development of product address on needs. Additionally, that solutions

the terms of of side, we accountability. executive management And performance, to sustainability leaders’ beginning and we linking in senior new including compensation are in minorities and to roles governance and intend by assessments XXXX, representation XXXX. diversity those in ensure commitments, and directly social women the in goals double On finally, to fiscal

have now $XX offerings double-digit we growing with level having building of their efficiency our connected most buildings, over at together next This and customers available suite at rollout capabilities, most launch of seeing industry’s core on Turning least quarter, are by significant solutions. a engagement which particular the which create of return and is The environments, interact we a we $XX new intelligence, unique with to to five years. offerings their leverages data-driven serve X green AI transform with solve and customers opportunity, billion OpenBlue and people CAGR between create very OpenBlue. combining customers Buildings, at to enables and sustainability. comprehensive with which menu we from Slide OpenBlue the launched own holistic partners. of on our the how that technologies investment XX goals Healthy is seven to dynamic an strength market billion paybacks. We of offerings By maximize of customer that this remain for encouraged for solutions, update the is high well shorter problems the prevent We size going and choose a new achieve safe these

and with the positioned are We with which that is the transformation Healthy Buildings, of aligned U.S. administration. directly incoming of accelerate the ideally technologies priorities solutions reinvention and

is Our pipeline partners continues steam. to and with Accenture gaining Salesforce Microsoft, momentum build a key like

Service is Turning on is an with two profitability average. company service momentum Slide that to business is attractive showing that times incredibly the X.

deploying our plus in power mid-single to service and growth OpenBlue per user on fully an well revenue organic rates reduce the to enhance are drive basis, We attachment resources of offerings as digit leveraging annual as attrition. improve

Turning X. to new products on Slide

new As last engaged we over you most amount a in the been know, in of several development years. reinvestment of significant product have

helping as Our their sustainability connected while equipment ready and engineering customers goals. products efforts primary investment reinvigorating technologies drivers, at are R&D ensuring of and designing more product aimed our all new about reach been We and the future out that themes. have of and address portfolio, We themes occupants. core think several product new connectivity electrification, regulatory digital having our launched quarter in cost healthy four these or and environmental, recently

portfolio cooled expand to of equipment low continue or ultra chiller screw we And chiller our that refrigerants. with We with our uses one GWP low QX, platforms. water that did in

a product ahead launched configurations market ready the our and is and flow Mercury Side and first energy accommodate spaces in VRF for X across YORK design and for an or kind. expand by that is geared the smaller package XXXX exciting wouldn’t is is more building fuels. Flow with reliance years resi light use big previously who commercial the which first existing also This In system, easily Asia, carbon is compliant modular emissions and our top markets. is the systems. industry a customers, driving opportunity needs of both we the change, and on Europe new We And more tonnage another energy its two theme, Electrification enabling which lowering in fossil cost-effective in the retrofit It the the meets significant with trend efficient standards heat that Asia, industrial that pump time. split emission demand installation to HVAC particularly XXXX of new of system want to launched refrigeration changeover. electrification is already towards way. opens technology

connectivity, in factory is are in investing enabled more every which for increasingly world. that to addition a piece equipment of making cybersecurity sure also leaves become In that we important has digital our technology, significantly

of clean we have has some for rapid demand most innovation air had. technologies sessions new resulted in Lastly, the

system our Wash Frost and commercial residential example, as coils hygienic new small to more Premium as applies proprietary quality increase well in technology, For Hitachi of air Ductless applications. level the

XXX the been we’ve new a fiscal last vitality over months, generating planned products increasing years product Over we’ve XX the of introductions, in product cadence XXXX. higher with had past in of new than level

We investing in large are and players. distribution our leverage and strategic channel points of to other channel with our partnerships dealers expand also

continue validation several tremendous seeing expect in would years. over of our to and the next We’re marketplace that the investment

profitability, to wanted with just per Olivier performance the Slide overall and improved X solid revenue, in I detail, in start Before our share. orders, to year review earnings reiterate

Additionally, free exceptionally cash flow was strong.

it to Olivier Now, go over the let to turn through me details.

Olivier Leonetti

George, morning Thanks, for $X.XX on well pandemic. outperformed a products of just business Slide XX margin North to benefiting in the everyone. headwinds the declined X. America despite of including highest maintained to X% allocation. approach Asia last have merger, as discussed well the improving continued compared high since and quarter. expectations to here organically, points as the our sequentially global profitability decline first China. sales as I capital X% EBITA to basis good residential levels year-over-year the in share the expended lower Hitachi any we Segment as primarily volume X% QX both our Relative disciplined half Continuing XX%, rate to Pacific result HVAC demand in related count higher from of increased as EPS equipment,

flow field activity Slide driven orders XXX% X% basis QX decline $XXX businesses recovery. slower EMEALA and cash the on our for the with turn Europe. retrofit to was provide fire the overall XX% with year-over-year cash moderating core businesses reported recovery from non-resi call, details but and to of later continue bill strong, performance puts conversion activity pressure new the our year. in by the in us our our full start experiencing the commercial free will just install showing in by XX. Please on supported about of million. quarter despite to Orders still X% security business over Our improve on Service increased of path signs strong achieve to to performance in a I up the a

with over X% the to American year-on-year. strong year North to billion year-over-year backlog and XXX% slightly $X up up up $X.X X% up HVAC extremely was book-to-bill growth Backlog products billion. backlog just service billion resi over accelerated $X.X X% our with in business, to global up prior Our over install

our are business. We in gives confidence backlog see service in which mid for more single-digits our us that beginning outlook rates accelerate, to conversion growth

that projects historical improving access rate funded the flow to larger is backlog site still prior been continued to install allowed, that's Our have has below were pandemic. levels. we execute With

As positive reached towards incoming shorter cycle completion backlog which those projects, is margin outlook. remixing projects near-term is for

continue actions to EPS efforts on our keep pressure and the on versus volume to tailwind $X.XX We declines. net financing year. lower a tight COVID and mitigate XX, were several broad-based past price of we to $X.XX by position and in share control the quarters, us bridge mitigating we netted related volume interest including remained to costs, mix. Slide Turning experienced controlling with cost unfavorable prior count to costs positive benefited $X.XX. ongoing SG&A each Similar headwind Net operations

organically with install America turn due retrofit in customers to in performance business projects. activity up would segment business North Segment offset next primarily down contractual orders linked domain to channel in gross we And year, service the segment My Sales year-over-year included the expect performance points low also revenues still across end results recurring market was declined declined commentary continue new although discuss basis experienced year-over-year detail. by XX.X%, our the increased in was down reflecting Slide current the referred us margin XX on to up as X% XX remain install in delay XX. QX X%. to to weakness lower Let drop quarters. transactional large over spend our strong Services with part to to the construction Slide more discretionary points. in margin customers last environment. XX all single-digits basis X% two to of our inflect we this depressed service

saw slightly efforts the X% America geographies by the Continued favorable half declines lockdown its or significant by also federal $X.X of North our HVAC in exacerbated service with more the basis, government improving change most down as teens double-digits. and region healthy in this XX% while APAC due favorable down continued more was the comps pandemic billion significant of revenue X% improved allow benefited related impacted weakness with we India, managing cases and under quarter in points than sequential Europe basis our fixed and East in the renewed quarter in up X% in China, in down declined as said down XX.X% backlog, mitigation and across and basis XX challenges key service of growing easy since while the Persistent with declined X% mitigation volume Backlog due in low the geographies $X.X in softness turn a COVID-XX flat. full Orders X% restrictions saw back should couple to COVID than quarters the Southeast renewed the Backlog to increased EMEALA mix year-over-year. to is X% with modestly due business. to Orders geography, solid continued XXX the over against quarter. QX. disruption Latin was growth business. Asia restrictions mitigation the high positive quarter last decline. deteriorated spike X%. margins to down lockdowns in offset pressure, revenues was of favorable XX% other low mix Middle regions expanding the related from cost and geographies declined with but strength year-over-year. of Orders major in other second in on of grew us up administration. By install single-digits Sales EBITDA a growth prior benefit and post absorption cost billion areas in rebounded mix, EBITDA America cost volume service the efforts in year margins offset. APAC significant better X% as orders. to Pacific. us and of backlog EMEALA activity stronger year-over-year have points That year-over-year. more continued modest revenue and $X.X actions restrictions to the parts install despite X% offset China China throughout like several lookdowns XX% went growing billion QX orders XX% in next the declined deleverage. grew and

products, better our grew in sharp a sequentially and market the Moving quarter from and organic quarter continues an continued revenue on declined to to as gain North of basis sales in In resi product launches. We offsetting HVAC our expect XX% HVAC India the with expanding relatively its begin we Security recovery X% would residential should points result the America the global as businesses. single-digit outperformance and Taiwan new a Pacific, still in continue decline HVAC trends next of strong. grew to with more distribution Japan. in over these and our decelerating growth several growth Asia business resi months, be low than but share X%

growth, QX. our Although China our revenue not year-over-year reflected Nsense in in XX% in JV grew

in Security rate cost light Fire as declined basis with commercial & to as volume products than On offset digits negative points the absorptions strong fire EBITDA margin well suppression than particularly cost more commercial positive growth unitary. high the at decline mitigating pressure as as related mix. market benefit remains under XX.X% year-over-year HVAC in XX single and weakness offset and business side, detection more digits of continued actions markets. by price the and expanded single the Security our overall the in commercial sales declined commercial low

of from the Slide step cost to We next year-over-year corporate half reductions structural to temporary down Turning throughout million XX, begins the second mitigation reductions. course to was continuous expense do corporate as quarter up cost to significantly reinstate. $XX expense and and expect benefiting cost actions

QX, $XXX million expense the to for the in now range we favorable to year. $XXX be performance expect million of the in corporate Given

balance Starting at period. quarter, on significant to $XXX cash for prior sheet million and our changes Turning X No Slide with page. top the XX. balance sheet the flow In the repurchased roughly approximately we of the shares million. the versus

On in remarkable a free quarter, As million which is cash, flow performance which good the we very sheet said, remains outflow. in balance experiences shape. generated $XXX quarter, the for we cash cash typically have truly of

moved from adjusted cash year, this As a away cash. the beginning so available free represents flow construct, reminder, free true this we

from operations as outflow reported refund integration cost. cash million cash last flow $XXX free well related to year tax and as cash $XXX Our a million included

While benefits ramping some there was and process were chilling year-over-year CapEx driving back with clearly underlying some substantial timing operational performance primary driver. increase up the

turn let’s to for Now, Slide outlook. our XX

the visibility, fiscal outlook has more the Although in confidence the market remains for given start slightly year the and to XXXX increased. uncertain, steady our

the our we the range, in with In significantly revenue turning initiating in and expect the then organic positive low-to-mid QX ramping formal addition in half. for to guidance; QX we are providing fiscal slightly growth full-year guidance, also Starting still full-year. single-digit guidance second

continue last last look the the cost cost streamline for return temporary mentioned permanent opportunities we I will some of basis. a cost that additional were year, of course the this we subject out to including As quarter, to on of year, manage over to actions and mitigation

overall levers to with points basis basis to QX which to execution margin to XX% to the as on with EPS EPS actions. profitability XX%. continued for the in strong range range to was in $X.XX of to cost benefits We XXXX. to points $X.XX. have margins recall of XXX as be the improve actions in points would QX from well you focused will through up EBITDA full-year for expected over basis points $X.XX, many of expand by result as would are solid basis is continue XX These, $X.XX XXXX, be our XX expected X% continued to margin along XX expansion fiscal SG&A. gross up

raising conversion operator, that a what for cash challenging the questions. continued are outlook we basis to cash Overall, flow strong for performance With environment. open in full-year. reported for we the XXX% remains can our strong the line in on QX, our Given approximately performance free

Operator

Thank with Our Nigel comes Research. you. [Operator Instructions] from Wolfe first Coe question

Your line is open.

Nigel Coe

Thanks. Good everyone. morning,

George Oliver

Good morning, Nigel.

Nigel Coe

details for very thanks the all, of additional slides, the been helpful. first So on all

at the the flatter. equation mix, raw terms that out that would here. looking full implied realize in temporary So for into the cause in we But the back costs Anything the margin obviously got anything about of kind we've year, half? materials? of margin much flatten I is that should back think to half guide is there second else come else

George Oliver

the second calls. are prior of the the mitigated in going second So, the margin Nigel, that year, last half for are marginally year be is good of morning. implies In is discussed The the guide up. about a we be going to – that some the We rate we discussed for half we to is Indeed, the second to year costs net come but $XX million, headwind. going back. half the

As last costs on we're those mitigating quarter, I coming back. working indicated

we'll have too It's We back those come us more margin to are an second and in half, structured, Nigel. for in in to when place. early plans improvement a bit plans the commit

Nigel Coe

sort to any that's of obtain Great, do What hundred increase So curious by now And role in how either of looking just that would is looking the XX% incentives what technicians? initiatives, be that. helpful. few for then clear. basis a place you're sales help to year. I'm achieve you there And or service have the attachment attachment points rate in to that? rates,

George Oliver

for So, and at you a very been has Nigel, Service we've vector accelerated of trends. that our with healthy laid it's course, buildings growth, attractive when as billion out, $X business, look the

installed under-serving been we've historically, at base. look you when our So

And been that's that, after back so us. that, competitive a and real opportunity and for advantage material we going we've believe a

as differentiating utilization data drive as to solutions to OpenBlue. seen the at up problems, We've gives really solve in We're increasing that ultimately points be people the attachment at longer EBITDA in we Xx and been opportunity being And about connectivity margin services look able within with deploying We and attach great that to sequentially to it's of able our our be the basis profile, technology that capabilities, market term well you have XX rate. QX. look get QX. us new an here with as progress able contracts our we're overall now enhancing contracts, company margin. with our When coverage bigger

accelerate that expect the year XXX up we we rate We enter attach whole for points XXXX. will will and our XXX move as or actually basis

needle able that and it's all take can move to with to attach to a so base. And we to combination that of lot what how historically what of us we be serve truly a truly positions done we've more that, do now the installed

Nigel Coe

Okay, thanks, George.

Operator

Thank you, Coe. Mr.

Markets. Our from Deane next question is Dray RBC Capital with

is open line Your sir.

Deane Dray

Thank morning everyone. you. Good

George Oliver

Deane. morning, Good

Deane Dray

to Hi. really indoor right the you meaningful really we is us services, in how you Maybe how I post this how slide seeing is that give theme digital. a quality hoping are little Healthy George, upfront the think that in $XX today? $XX And billion arrived I you more COVID. of a air seeing bit And opportunity whole at profiling benefit granularity of billion. Buildings, this much like equipment, of was sense can much

George Oliver

the and billion it building Yes, Healthy within look million so, of million when a what Buildings, of And at else said a Healthy addressable do dollars then it's the about Buildings. holistically. launched around what both you to to new air, $XX represent market we at or few when holistically, clean previously, $XX all you does it comprehensive we address here, was be we Deane, which OpenBlue our look able strategy new

our these do now look technology, to now developing, it about combines takes products, our now truly able it we're tailors individual when or service solutions not those health we're to our Building safety of drive of OpenBlue our initiative, some services we reduce you next have be businesses we to driving to what takes Healthy takes now each sustainability point, be unique outcomes. look XX that, at are we not and When only Now create we new able to have than able driving and it outcomes. you at addresses your achieve across implemented And it be to and efficiency, all type positioned customer. half services of it Building where core, to do, energy we're data but phase, more this only Healthy to what industries, then that

customers but So longer it's performance to of aimed through which only to optimizing not and of all only their energy efficiency contributes sustainability at goals. helping not work, also term, return their infrastructure reduction, their

differentiate type all of that us to So it's of that to what of can really solutions. we allows a do these combination deliver really

Deane Dray

just a there. follow-up And as Great.

opportunity had How an pure to new split equipment you the windfall forth the between, the say, connected digital much the of opportunity, equipment, onetime let's building and this, If side ongoing a split? is of recurring filtration ongoing service versus what's so monitoring, higher upgrade versus the opportunity?

George Oliver

an see up Well, up and filters clean, be air to Orders this filtration up give within huge seen XX%. increases of units. We're XXX% of you filtration. our We've XXX%. we've pleated our XX%, kind XX%. We're global seeing purification over seeing year-on-year. will our idea, We products with well products, potable growth our got strong ISO

aspect, are provide the in filtration, we to we solutions in as at disinfection, the benefit ultimately well ultimately So as seeing isolation we products every can solutions. look with recirculation do go what that our that into our

customers so with collect delivering upgrading in And our – deployed it that we Medicines the the we connectivity optimize the is the able can with working across really outcome with people can how when have have and combination that we Deane. these then we data to globe platform now being that are solutions. we're XX,XXX advantage then produce intimately the of that it's a that, more we to all gain these of systems, utilize that our as use we And –

Deane Dray

That And class in really put you of ESG That’s best just congratulations great. on all your you. commitments. here. Thank guys does

George Oliver

Deane. Thanks,

Operator

question Thank Mr. Dray. you for your

comes next Davis Our question from with Scott Research. Melius

Your line is open sir.

Scott Davis

everybody. morning good Hi,

George Oliver

Good morning, Scott.

Scott Davis

get and opening a XXXX? M&A there buybacks kind more M&A Or of interested? of markets that any between is in preference George, you

George Oliver

as that how we think improvement of – is deliver ultimately our more pipeline, getting organic in we've Yes, M&A contribute a that we're is the being that, to we improving been we're lot that a we doing Scott, to with and going here, able here on, be we're as what deliver so with fundamentals confidence space building investments growth. attractive that take able to in and our our continued

at basis look year, a supporting So the our to can enhance area Solutions basis, sale. also from pipeline our or go-to that ability And on the but But then as we doing M&A an optimistically technologies, billion we with we're see services, the contribute be dividend, X% are remaining work doing $X committed we only our basis the on go-forward as see, strong buybacks. accelerate we still of X% market, not able the Power to that being our annual the that's an for the on growth we go-forward a because priorities and OpenBlue.

Scott Davis

just then service. And sense. Make to switching gears

can You've, on attachments you Slide what you mean, rate, growth there? say I current XX%. mean, get XX, is not referenced the a – of What but mid-single-digit rate entitlement I and the double we're there yet.

else the perhaps you Service? driving customer gets of rate within sales education that kind So, to higher to force something or within growth either happen what a or in needs

George Oliver

look much that to tackling. Scott, it our and at if of the was before growth rate a pandemic, and lot the blocking So, X%, pretty X% you had and rate got we market was

been those targeting investing challenges installed that the our of because to address manner, services been enhancing a Now our services. to opportunity new in have we We've new an customers facing. base technologies We've to be with to be forward much able OpenBlue. some able and strategically, been aggressive with we've in new bring more that are

look our only of in We're orders – our our together you X%, service down, been So that down were when it put QX. here and you go-forward was QX, when down actually performance a at X% you improving. look and on – was in orders our here, we've sequentially all projecting at getting longer-term QX revenue here a basis, to that in turned within see we a and up we it improve. that go-forward from will continue we QX. X% orders. quarter. And a contracts in of QX those higher positive standpoint, the We're ramp On mix believe continuing and to We're

be So, able that, it's able to utilizing to being ultimately the and to then not the the and outcomes additional connected, attach. field base, of positioned offerings, within only really capabilities installed be to able combination creating adding being it here data, do a get new mining enhance

Our quarter basis XXX points the see attach rate that. XX first XXX that and improving points basis or the in over sequentially was up we then and accelerating beyond year

attractive get So, through mid-single year, believe growth Scott accelerate XXXX, the with there here we margins and that from going that can confidence in that us digit gives we forward. very we'll to that

Scott Davis

luck, Thanks, encouraging. Sounds Good George. guys.

George Oliver

Scott. Thanks,

Operator

your Mr. Thank question, you for Davis.

question Tusa Steve with JPMorgan. next Our from is

open, is line Your sir.

Steve Tusa

Hi, morning. guys. Good

George Oliver

Hi, Steve.

Steve Tusa

seeing U.S.? equipment of in non-res in us weak, cycle mean, is? kind the on I the shaping all fill may to construction, But hard Just just be up obviously you what you're market like that kind in commercial of trend core, real you've got tell just ESG kind but is as HVAC equipment? IAQ on to the this opportunities front, what Can how of and your et versus on prior cetera. curious these like remains

George Oliver

Sure.

when our you applied. HVAC look So, at with let market, me start commercial

low-single projects remain The look of said, The seeing sequential of to in Olivier the Larger the Asia-Pac continues over low APAC. by slightly light and X%. that's as units when following down were they to again about timing. XX%. at orders retrofit some delayed is that America, being in flat, the pressure. did is sales some HVAC see then at digits growth the purely orders quarter-on-quarter. globally pressure are the down through weaker see down sales – quarter. smaller because timing under came as APAC is got generally actually quarter. getting North where was low-single back they being did globally, markets, continued as seeing install up our see traction China And business, market then now America We We did the improvement were North sequential of federal We we're unitary down tonnage better They larger you to it's applied When deferred. pressured in And commercial, of or So, mid-single-digits improvement well to as this look being there. the units as and well QX. more about a North service we're we're digits, now the in and you X%. accelerate. America actually mix was orders due in were lot and driven tonnage

We as we've gain made channel. as in that of result a continue share new products both investment as well to the

bullish there, industry. when think sustainability, drive markets trends very transfer whole which is these we're core. increased end our long-term investments align with heat to heat made that YZ pumps chillers you And in rooftops. we've leading our – technologies, that and investing with units launching been I electrification advanced and focus cool we're rooftops, with premier the in in more and the and a very still lot ultimately, And our we've is we're our VRF to drive the next-gen So, going are secular well attractive choice with space, that look now select on at pretty technology. And energy the tonnage going heavily now of air

forward. going really that but installed So, think space, building. and does of larger capitalize opportunity there leverage business on to the that invested this really with happening the we've space, when is connectivity that an us the and changes give service digital with been build you offering to now our And with base our now we're some in

so, improvement, we larger think on Steve. trends the positive, right being we seeing And sequentially to pressure are see the pushed a the bit, non-residential some are that construction I but sequential

Steve Tusa

stuff do on XXXX, U.S. the in one, the you calendar a be simple applied a just the markets will think in in the biggest down basis market? And ticket

George Oliver

will overall construction, the overall non-resi at when look slightly So, you the down. driven be by market market

Steve Tusa

Okay, got it.

George Oliver

Now, focusing capacity, high-growth that's going our and the some But industry these doing or higher cycle markets for whether the that the now, the metrics we end and markets obviously That's been and would the gaining above backlog our that mix, upgrades what's starts. remixing end new of we've follow, into like projects shorter have acceleration is we've been focused when been year. on business growth our with on the doing healthy see with the that be year. more North it the business are you and putting around the we demand positive with been retrofits share. ABI our that that buildings remixing And with we and be for you construction with to look at then work we've will towards America projecting drive

Steve Tusa

it. Appreciate Thanks. Great.

Operator

your question, for Mr. you Thank Tusa.

Our next Jeff with question Sprague from is Vertical Research.

is line open, sir. Your

Jeff Sprague

Thanks. Good morning, everyone.

George Oliver

Jeff. morning, Good

Jeff Sprague

morning. Good

unrelated questions. two Just

actually if saying reach? early because this. full I service score service like can but I attachment, you it seem points on First a so right, give being sense on And conservative probably some does think like – wonder on, a you're you're believe your back service us XX%, saying contract, you aggregate could you of

wondering so, is different taking are kind of attachment a of to level attachment if driven or service And new is ramping and a on customers service at up activity of you by the with, kind engaged primarily installations? this it function the really I'm being you're

George Oliver

all of above, the it's No, Jeff.

is, our that metrics around So, on we've provide. starts that as that whole base, we're all the where with doing the a brought driving. service strategy such new the we've to here, today we structured really It leadership, level brought we installed got what we've got new key of with we're services are understanding it we

out back significant bringing And that then that a solutions, have comes contracts opportunity includes those of We bring deploy revenue forward. to that to that go able get and being solutions, we and recurring base that with getting ultimately work. longer-term how holistic into installed

at newer field forward able and deliver with capabilities. the and solutions that technicians installed we able the that have in and attach with been the capacity it's that bring the base so, we're we're that in being get that our not same capabilities new additional and proposition our can to and being capabilities getting we because capabilities service field, field to time our And doing engineering expand OpenBlue but the a both. only value some to volume and and And a with all the leveraging technologies what the that actually new with the of be higher getting to providing. is projects the rate attach We're combined deploying of higher supported by we're able with the bringing in

look ability And and do of a the data rate, not so, believe customer at connectivity are that get attach that you you we solutions going because revenue we the and get the the then provided, able that as ultimately higher and course which setting to to being of both get very the continuing to be year rate, contribute XXXX get to up well. our to through per our going only forward, higher growth increase are

Jeff Sprague

on could for work zone. there sure In encouraging here unrelated flow? wonder but what in cash we opportunities to particular second you're that's Olivier, only It's benchmark the but driving like little you elaborate the not XXX% some flow in of probably can to me, doing kind see then bit huge really target the cash I question, you are this number further it on a make to now just seems dig what here? on I'm working And is DSOs. on, we're thing if

Olivier Leonetti

Jeff. morning, good Yes,

had this So, we’re And benefit at but are took some The we last company. we of are By in that despite we plus very with too. year were compression good prior we tax you that tax be pleased are we year, way, we when. the performance cash debate cash headwind believe quarter. going XXX% XXXX the flow XXX was said have this this call, the if to flow year with during cash in Jeff free pretty year. we concerned the believe, was in And we remember the

to at part and plan happening cash sure enterprise. It’s has a generation. We have to opportunities of what trending we level So house the we And working the that keep your the reviews have profit momentum have have your the improve DSO believe also on well. Few the been strong we capital, make at we things to discipline weekly today happening? top of we point, believe, to of is incentive to of we to strong make DSO. is the first, on stronger. point flow our ability And the level

So, aligned on lines keep all we performing cash, the Jeff, today, are to believe.

Jeff Sprague

I’ll Great. on. Thank it pass you.

Operator

Thank question, your Sprague. you for Mr.

Our Kaplowitz Citi next with question is Group. Andy from

open, Your sir. line is

Andy Kaplowitz

good Hey, guys. morning

George Oliver

Good morning.

Andy Kaplowitz

might related in see you quarter, up QX, terms last but mentioned snap actually given back a of decline. in in product of George, revenue pent in products the revenue QX, saw that somewhat you you improved pullback a

was it looks improve. North of like improvement seems some it American like but products residential, obviously continue that to & Fire So, Security

can you forward? color just in more category you’re in what So, seeing particular moving and that

George Oliver

products of Fire It which, product in Yes, as our new share. various let opportunities. healthy was quarter been the with the enabling we trends portfolio, COVID as & start I in had now, reinvesting, saw. the in very We’ve the underlying depth been products gaining the products by, leading. we the me core on is the built related breadth with global pleased really again that output and product performance overall industry HVAC both introductions Security to and are have is building well response We’ve and

the the Security now We’ve we’re pressured in And with In as we had Electronic and interfaces. has business, tonnage to our more our to continued interfaces. YZ leadership traction high heads, in heat that’s Choice we’ve Qualys capabilities good been the suppression, controls, there. expansion very Fire, well continue series and as strong. with providing the pumps. had platform. fire of the connectivity, rooftops. Amedisys getting upgrades Just quickly, continuous had enhance although Electronic or additional HVAC, and Select the notification, we’re so continued XX, chiller been in advance and We’ve around a have Premier our in hazard residential better we’re Affinity user smart and York solutions. advance leader to year enhanced last we’re position the now in business, home sprinkler over Fire we the

in. nicely. one be stronger each business better a which expected product non-resi we world JCH performance rest a and quarter. But of look within with would It residential, you pretty the saw gaining recovery really sequential better our saw There some share. into So the space And remaining. of and pressure than then recovers across broken business when is down businesses was much our better we there performance improvement at QX, in overall, definitely the

Olivier Leonetti

year. our in are number And Andy, we the of to prepared rest mentioned we remarks, product in new that accelerate of the launches going the

some but accelerate. new products will So already we that in have exciting QX, launched

for doing can business are optimistic this keep what us. we about So

George Oliver

And & question, Andy, was second your Fire Security? around

Andy Kaplowitz

particular. in Yes,

George Oliver

I’d when critical it Fire Service then in all we’re able got doing We’ve now takes in due to Very & to saying to at our building in coming to building, very then attributes, together throughout within of they’re significant attractive then able remains And solution space. these are to creates the that profile It’s So, Service. drive start collected core systems. comprehensive us. deploying the in the revenue base, manage data the OpenBlue it incredible you our in the and an with of forefront mix. margin and total, to by go-to-market. installed and XX% attractive look recurring what brings revenues building. done Security to interactively gets building, being because a really technology And it a Security the being is is which what

look that’s When moderated at you The moderate. in QX. performance, did been very Service So the we important.

QX. be was resource right turned will the the it’s around We’re and of allocation But forward. slightly our going to issue. Retail the We at drive believe to some fire the be down Pac positioned to to be a positive, HVAC down. to a air indoor our timing the of released, those able only driving I retail. we’ll that’s that look be When Service down that in saw general and the X%, pressure These or one recurring on overall of only prioritization note, quality down that’s pressure. was same is customers. roughly And of about – projects X% and under X% and that revenue long-term capitalize you mainly it And continues in America only other be Service about North Andy, It’s the able ability lot install. to project it’s now, is delays an where business. turned is positive, due Asia and EMEALA, contracts

what’s infrastructure. But been working essential So of given high-value less at while addition to business. retail, the and omnichannels critical essential within we a their in It’s time, helping to reposition apparel be retailers ourselves are in the mortar we’re we’ve expand – the retailers happening same to it’s to a their been great brick proposition the the business. to

for we a very are So business that’s still but in where Fire & us. attractive Security,

Andy Kaplowitz

I cost. it’s inflation to the in Very on XXXX, in past. helpful. cover Olivier, rising a And assume forecast, I you’ve just price but able been clarification mean, quick your for versus

Just in any thoughts on price versus XXXX. costs

Olivier Leonetti

in Andy. remain It was believe And for quarter, in organization and still discipline year. the is the the we will of positive back strong the the price/cost It’s positive.

George Oliver

the top pricing in basis And over able the And strong line to XXX reinforce couple that, strategic every points to being Andy. very of seeing put years. are net place, last the We’ve year. demonstrated to we’ve Yes, performance, that work we there’s tell enough commodity with costs deploying chain, productivity, more levers other I than BAV, supply around we’re leveraging the done, with – direct you, we’ve our But mitigating material increase. the around can actions buy. across

Olivier and headwind positive guidance we So, we’re be very have incorporates well price able updated the cost see. margin the to provided cost that price that positioned to

Andy Kaplowitz

Thanks. guys. helpful, Very

Operator

Kaplowitz. Mr. your question, Thank for you

next Julian Barclays. Our from is Mitchell one with

Your line is open, sir.

Julian Mitchell

good question morning. around May just first outlook. Hi, the installed the be

maybe also, understand So, And quarter. we the in expect Security may Understood us installed there some that in weakness the figure & what think so for growth? X% revenues regions. and forth Fire to in down you XXXX? help is should were But orders return globally, when different fiscal for why

George Oliver

and growth like look a have starts Julian, and others the out to at construction were the the they verticals challenged. weaker let mixed. certainly that at me being some coming more and strong ABI start. When there’s you that new There’s market are pointing construction. look you of indicators still XXXX, verticals, That was and when

it when under construction is So, still look pressure. starts, new at you

about now – commercial lot you capitalize into of certain then now When health. look and office, markets retrofit service than that being single-digits with of the verticals, others. both and this look in growth, respect pressure the our back see definitely there to And short on building there see do beginning is to opportunity They’re a better than reallocating right receiving installed when are healthcare We under that XX% institutional at and are healthy of you our buildings education. the sales in up both our related verticals at is then year new those you When in we because attention But with utilization term. and higher for growth think able verticals to we to of more the retrofit is believe long-term. a what lower are it resources these there to seeing growing will up. activity now interest We spite do low be solutions going a mixed pick rates metrics, been buildings. because the we’ve more pick there’s near business within demand, normal to be lot go that

overall But year year-on-year. up the to us shorter through into I orders. half of what And second believe months. like. the we in with so, is We North that the which billion some the the is We course continue we see when the cycle. uncertainty actually believe it the and we second six look that and beyond set for for going to has delayed impact creating up and have and believe backlog But investment to in be you of we backlog COVID, limited at that XXXX. mean, the get do a well believe mix decisions, that orders year, visibility the are shutdowns in $X as to our eased, the been within improve with of pipeline, on growing. Europe we instance, restrictions, the is see here start we’ll we see will our access recovering That quarter. continuing headwinds now of recover be here and LatAm the pipeline America, some And actually some is with we

be these the that is is had And with outperform of we’ve is of to the So, then, some recovered turn which site with helping that us the with within market year, market. beginning now course PSAs, through able the pressure book that in non-resi helping offset restrictions. us the to service

believe you’ll industry XXXX. positive we’re recover start in the will that see to you’ll going The to and course see year. market expansion So, to outperform metrics through I of continue the the within

Julian Mitchell

That’s margin four Thanks. And follow-up helpful. quick the then the across on just a outlook segments.

should the lag operating that that? lead on And that So, out leverage expect do you’d call Anything of Global firm-wide in or figure for for perhaps, year. what segments XX plus we particular, in bps operating kind you got margin Products?

Olivier Leonetti

the actually, going the profile the year. So business of be equally margin is to up in

said the XX the can basis of and the – various If by let XX points. before look margin we EBITDA we basis various increase about have products, me services at or going you up. repeat this we margin installed the points we believe see margin And regions, to enterprise,

are at obviously We pandemic. negative and good the the ability lining be have this up profitability today this year to the on the our to impact of deliver despite keep level promise. to this of But this we several ability feel business activities about we improving

Julian Mitchell

Great. you. Thank

George Oliver

Julian. Thanks,

Operator

for Mitchell. question, your you Mr. Thank

question last come Joe Our with from Sachs. Ritchie Goldman will

line is sir. open, Your

Joe Ritchie

everybody, putting me morning, thanks for Good Thanks. in. and

George Oliver

morning. Good

Joe Ritchie

about And you then couple some that were of you where So, to I years? want those I going start like next you increase needed attachment take and I’m to the go Any share? you around to my when of discussion over investments types around attachment those of as you’re to in think what’s rates? back attachment about to expand just rates ask competitors quantification specifically discussing. rates, investments talk like expect from to your the maybe is, that’s guess one taking that the question your share the order actually question,

George Oliver

rate. Yes, It’s after. go to deployed so be enabling able have is our making across not we only and really right ability to the we’re higher making the sure what’s the get able a attach regions to being that capacity investments

investments base solutions historically and recurring us upgrading a then underlying to the being get being that new the there That to then and contract, those and those then that bring that So, to contract. technology long-term then that’s now installed tie we’ve overall we getting attach. how able our bring after be on able But enables a technology that deployed to solution out to embed and into the revenue today strategy. able going underserved new and and is forward new, by getting

be our products are built were at we’ve ultimately OpenBlue. with it’s are making got that being our digital – our then within investments the that infrastructure And into built within the the deployed product into has building to sure made capabilities They’re stage. all So, here our elements successfully XX deliver we that been of to this the have into months. And XX plan have the regions been our to in last to reinvestment. customers. for that And those able ongoing built

to doing. starting we’re that of with we’re labor the And our so, the fruits see work

on We’re the beginning new projects. rate get to the attachment

pickup the per ultimately installed is leading but only all We’re service attach rate, rate. not to growth the accelerating beginning revenue higher a And base. the of get in overall service higher customer that on to and

Olivier Leonetti

those investments while just Joe, as deliver of revenue. clear, it SG&A proportion to make we a scaling will

So, service strategic do not need this we add to initiative. as on believe OpEx proportion we to a deliver revenue of

Joe Ritchie

– be you and that’s is part take guess point? Yes any provide then question about where color able to second can – there no, just maybe helpful. But this you’re going to I that that at share;

George Oliver

our when look – Well, installed say, our with it’s I’d line in you base. at

verticals. the each in strong are of We

connectivity, only the connectivity basis that long-term with the is data, and a I we The that value that service solve, think a a such done of you’ve that or improve customers of breakdown is the difference – then contracts. haven’t been that able based. on historically to able but do we been can maintain not the with more Joe, more It’s the through to break fix, a that use data. to just solve of longer-term and it’s strategy the some being with was provided The and of mechanical historically of now, of the problems the broad proposition use got that verticals. key

new or or across industrial any the on product of our So, it’d government, all board it’s the of one education spaces. installations, healthcare, whether be really

has our we model, with delivered think historically positioned that outcome. with of we’ve uniquely an had our and successfully some business contracting that are I business the model performance

installed use of can now and lot embedding technologies that and generate are the ultimately collect a that we capabilities, so then with with that service We more base, we deploy. our the data we service

Joe Ritchie

both. George. makes you, Thank That sense,

George Oliver

want in to our Thanks, of pleased everyone, what families that to execute global environment. for you a soon. across teams resiliency safe certainly and I the performance continued here, our look just to and so I speaking strong globe of with spite Joe. remains in of the call have your I’m let incredibly pandemic. with continue of close. – the many continued thank, the and you that I’m hope forward engaging you hour teams And I remain and can me tell this I execute challenging our proud to think morning. again extremely at we’re joining you our how

So, our operator, concludes call that today.

Operator

all Thank today’s much you participating call. so for sir. Thank in conference you

may You have now of disconnect. And great day. your rest a

Johnson Controls International (JCI) 29 Jan 212021 Q1 Earnings call transcript